Efforts to grow the nation’s economy has received a boost from the banking sector as six leading banks injected additional N1.337 trillion through loans and advances to their customers across all sectors of the economy between January and September 2020.
The loans were disbursed by Access Bank Plc, FBN Holdings Plc, Fidelity Bank Plc, Guaranty Trust Bank Plc, United Bank for Africa (UBA) Plc and Zenith Bank Plc for the nine months ended September 30, 2020.
Checks by Economic Confidential showed that the six banks credits to customers as of September 2020 stood at N13.958 trillion, up by 10.59 per cent from December 2019, indicating that an additional N1.337 trillion was given out within the nine months period.
A breakdown of the loans showed that Zenith Bank Plc recorded the highest of N405 billion, increasing its loans and advances from N2.306 trillion to N2.711 trillion. It was followed by UBA with N281 billion as the pan-African bank increased its loans from N2.169 trillion to N2.450 trillion while FBN Holdings Plc lent N262 billion to close the nine months with N2.869 trillion up from N2.607 trillion.
Access Bank Plc advanced N175 billion to its customers to increase its loans to N3.087 trillion as at September 2020, compared with N2.912 trillion as at the end of 2019. Fidelity Bank Plc raised its loans by N146 billion to N1.272 trillion from N1.126 trillion, while GTBank Plc accounted for N68 billion, increasing its loans to N1.569 trillion, compared with N1.501 trillion.
Analysts said apart from the determination of some banks to increase lending, the decision of the Central Bank of Nigeria (CBN) to increase banks’ lending-to-deposit ratio (LDR) to 60 per cent and later to 65 per cent with a deadline of December 2019 had contributed to the growth in loans and advances.
The LDR is part of customers’ deposits given out as loans by banks.
Some analysts had said the policy would lead to an uptrend in credit to the private sector.
For instance, analysts at Cowry Asset Management Limited said: “We feel that the sustained increase in credit to the private sector, which was induced by CBN’s policy of higher loan-to-deposit ratio, its increase from 60 per cent to 65 per cent took effect from January 1, 2020, should stimulate real sector growth.
“In addition to the restriction on Open Market Operations (OMO) sales to deposits money banks (DMBs) and foreign portfolio investors (FPIs), we expect credit to the private sector to further rise with a resultant growth in production output.
“It is believed that the sustained credit to the economy coupled with other policies by the CBN would help the economy to recover quickly from the recession.”
Analysts at Greenwich Research also said policies to lift Nigeria out of recession and prevent a repeat of the post-2016 recession fragile growth will hinge substantially on interventions focused on boosting the spending capacity of households.
“Already, the government has introduced measures including, but not limited to the N2.3 trillion COVID-19 stimulus programmes to reflate the economy and expansion of the social register from 2.6 million to 3.6 million households, with direct cash transfers as part of plans to lessen the pandemic-induced hardships.
“Likewise, the disbursement of N3.5 trillion from the CBN’s interventions has been a boost for the overall economy. Importantly, investment in infrastructure is critical to providing the much-needed growth impetus, even as social intervention schemes are redesigned within frameworks that guarantee successful deployment,” they said.